Slow growth raises stakes even higher for the Budget

The UK economy has entered a period of slower growth, with figures for the July-to-September quarter falling below expectations and the economy shrinking in September. While a cyber-attack on Jaguar Land Rover significantly impacted car production and contributed to September's contraction, the broader issue is a flagging economic momentum. Slowdowns are evident in consumer-facing services and business investment, exacerbated by high employment costs and ongoing uncertainty, leading consumers to remain cautious and businesses to delay investment. These disappointing growth figures increase the pressure on the upcoming Budget, which aims to provide fiscal certainty and avoid speculation about tax changes. The Budget will likely include measures to create a larger buffer against economic shocks and potentially alter the frequency of borrowing rule assessments, though achieving this certainty may necessitate tax increases. The Chancellor aims to avoid raising taxes on workers and investors, but the substantial fiscal gap makes this a challenging balancing act. On a positive note, the reduced economic growth makes further interest rate cuts by the Bank of England more likely, which could lead to lower mortgage rates. Government borrowing costs have also declined. However, speculation about tax changes has negatively impacted the property market, and a general lack of consumer confidence persists, unlike in the United States. Despite the economy avoiding recession and potentially being the second-fastest growing in the G7 this year, the Budget faces th... download the app to read more